Consistent (i.e., “good”) service is a nice thing to have in any industry. In a field that changes as fast as sales tax, it’s a necessity. But providers have their own business priorities as well and if customer service isn’t at the top of their list, changes could end up harming you. Maybe they’ve priced themselves out of your range or discontinued the service you need, or have become too big to match your specific needs. Maybe they’ve sold to a new, larger owner, what operational changes will occur, what happens to your data? (All of these are questions you should be asking)
It's important to have a steady provider who’s taken the time to learn your business and places your compliance and service first.
You generally have three options to address your sales tax compliance obligation: try to manage everything in-house; outsource to an experienced provider; or do nothing and roll the dice. That last sure isn’t recommended, yet many businesses fear outsourcing this piece of their business because they want to maintain control over the process.
But when done right, and you choose a provider that is more than just a technology you have to manage; outsourcing can save you time and money, reduce the burden on your current staff and remove risk and liability. It also, in theory, gives you support when you need it. Having an expert available to you for questions or concerns without adding stress to your own team can make a huge difference.
When, though, should you pay special attention to making sure your provider is consistently providing what you need for sales tax compliance? What brewing problems should you watch for?
1. Taxability of your company’s products or services over time.
This one of the key steps to complying with sales and use tax laws nationwide. But that can be a challenge. Understanding taxability of products and services was one of the biggest worries cited among execs in our recent survey regarding sales tax and business growth.
Don’t forget that as your business grows, so does your sales tax obligation. You need to watch both the nexus and taxability rules in each state so you understand where you have a sales tax responsibility as time goes on – and you must have a provider that does, too.
2. Tax calendars aren’t static.
Reporting sales tax and the amount of information required on each return varies with each state and local jurisdiction. Returns are typically due either monthly, quarterly, or annually. But some states have more unusual frequencies, including semi-annual, bi-monthly and occasional. In most cases, the higher the volume of tax to be reported, the more often you are required to file and pay.
Because of these complexities, it’s critical to maintain an accurate calendar that reflects where your business is registered for sales tax purposes. It’s up to your provider to stay on top of these possible changes. And if you rely on technology and fail to tell your software company that your filing frequency has changed and they file the returns late, that’s on you – not them.
3. Sales tax rules change fast.
In the four-plus years since the Supreme Court opened the floodgates of sales tax economic nexus with the landmark Wayfair decision, barely a month has gone by without changes somewhere in companies’ economic nexus and sales tax obligations.
Most recently, for instance, the last states with a state-wide sales tax (Florida and Missouri) joined the ranks of those enforcing economic nexus. Even in a state without a sales tax like Alaska, locally administered sales tax can be a nightmare for remote online businesses.
Digital products, cloud-only sales, marketplace facilitators: These are also now cutting-edge developing areas that promise to make sales tax more complex soon. You need a provider who is an expert in the subject matter and can answer your questions as needed. Not someone who will ask you to take a number and wait for a response.
4. Audits are a clear danger.
If you and your company haven’t been hit with a sales tax audit yet, congrats. Your luck probably won’t hold out forever: In our recent market survey, more than one in four top professionals in varied industries reported seeing an increase in state sales tax audits in the past two years. Almost half of respondents expect sales tax audits to become more frequent in the next two years – and nearly one in five cite being audited as one of their chief worries.
The Sales Tax Institute reports that Maine, Illinois, California, Massachusetts, Wisconsin and Washington have been the most aggressive states in sending notices and audit requests. Industry observers look for New York, Ohio and New Jersey to soon intensify enforcement. California is already in a class of its own …
Punishments of noncompliance can range from assessments, penalties and liens to use of collection agencies for past due taxes. And protected by no statute of limitations for unfiled returns, you could be looking at some considerable damage to your business. Understanding who is responsible for errors is an important part of a partner relationship. You could still hold the responsibility and risk for someone else’s errors, even though you’re trusting a provider to manage it for you. Whether you’re trusting someone to manage an audit for you or to ensure you’re in compliance for when you get audited, it’s important to understand your relationship and trust your provider. Are they up to it?
5. Reliable support even as your business experiences change.
Businesses grow and businesses face hardships. Between mergers, acquisitions, layoffs and resignations, the landscape of your business evolves over time. To have a dedicated provider who provides one to one support, even as you experience change is huge to providing continuity in your sales tax obligations.
To manage sales tax compliance completely, a provider needs a deep understanding of your business and processes and to know what steps to take to ensure compliance throughout the changes you experience or changes within the sales tax world. If a provider cannot provide you with the ability to reach out to someone, ideally a named person or persons, then you really don’t have continuity of care or support.
At TaxConnex, we use more than just technology to take sales tax off your plate. By relying on years of expertise and having dedicated practitioners to provide support and answer questions, we can help your business stay on top of your nexus, taxability and ensure you’re are maintaining compliance in the states where you have an obligation. To find out how, please reach out.